Merchants share their top 5 chargeback challenges
Last year, U.S. eCommerce sales exceeded $860 billion, a 44% year-over-year increase and the highest annual growth increase in 20 years. Global eCommerce spending is projected to reach $6.3 trillion by 2021, which could generate billions in chargebacks and fraud losses. Unfortunately, those losses are made all the more painful by a lengthy and expensive chargeback process. Regardless of year, chargebacks present all merchants with significant challenges. So Kount asked merchants to identify their top chargebacks challenges in the “State of Chargebacks” report.
- Disputing chargebacks (59%)
- Identifying friendly fraud (58%)
- Reducing chargeback rates (50%)
- Balancing chargebacks and false positives (42%)
- Cost of chargebacks (39%)
Merchants said their top chargeback challenge is disputing chargebacks (or representment). When it comes to chargeback representment, merchants said difficulties include low win rates and the operational burden of disputing chargebacks. The survey also asked merchants how often they dispute chargebacks. A quarter of merchants dispute 15% or fewer chargebacks. About 1 in 6 disputes between 15% and 30% of chargebacks. Almost 1 in 10 disputes between 30% and 45% of chargebacks. Finally, 39% of merchants say they dispute more than 60% of chargebacks.
According to the survey, revenue impacts a merchant’s decision to dispute chargebacks. Of merchants that make more than $250 million in annual online revenue, less than a third dispute more than 60% of their chargebacks. Of merchants that make less than $10 million in annual online revenue, almost half dispute more than 60% of their chargebacks.
When it comes to friendly fraud, merchants said they struggle to handle dishonest customers. On top of that, they find it hard to dispute charges within a system that often favor cardholders over merchants. Reducing chargeback rates, balancing chargebacks and false positives, and the cost of chargebacks rounded out the top five challenges.
In regard to the costs of chargebacks, however, merchants with varying online revenue ranked this challenge differently. Nearly half of merchants with less than $10 million in annual online revenue ranked the cost of chargebacks in their top three challenges. Only 1 in 3 larger merchants with $100 million or more in annual online revenue ranked the same.
The survey indicates that the higher the merchant’s online revenue, the more likely they are to be concerned with the finer nuances of chargeback management. For example, more than half $100 million merchants say balancing chargeback prevention and false positives is a top challenge. Only 32% of $10 million merchants said the same.
Reduce chargeback challenges with Dispute and Chargeback Management
Getting to the root of chargebacks is critical. For most merchants, CNP fraud and friendly fraud are the two primary sources of chargebacks. Nearly half of merchants say that CNP fraud is their biggest source of chargebacks. But only 45% of organizations are using a fraud solution.
An AI-driven digital fraud prevention solution can help businesses prevent chargebacks before they accept a transaction. When businesses prevent fraud upfront, they can significantly reduce chargebacks from criminal fraud. Once businesses reduce criminal fraud, they can focus on reducing chargebacks from friendly fraud and legitimate disputes (or merchant errors).
Kount’s Dispute and Chargeback Management solution gives businesses a single dashboard to access tools that can help them deflect chargebacks and identify friendly fraud. With the right solution, businesses can quickly communicate transaction data to issuing banks to avoid chargebacks. And they can refund purchases or stop shipment quickly to save sales and prevent inventory loss.